1998CRE1238B THE MEDICARE+CHOICE PHARMACEUTICAL MANAGEMENT ACT
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Archive-Name: gov/us/fed/congress/record/1998/jun/25/1998CRE1238B
[Congressional Record: June 25, 1998 (Extensions)]
[Page E1238-E1240]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
[DOCID:cr25jn98-63]
THE MEDICARE+CHOICE PHARMACEUTICAL MANAGEMENT ACT
______
HON. FORTNEY PETE STARK
of california
in the house of representatives
Thursday, June 25, 1998
Mr. STARK. Mr. Speaker, I am pleased to introduce the Medicare+Choice
Pharmaceutical Management Act of 1998.
This bill would provide important protections for Medicare
beneficiaries receiving prescription drug benefits through
Medicare+Choice plans. These plans would be required to disclose
important information about how they manage their drug benefits to cut
costs, including any incentives offered to doctors to get them to
switch to cheaper, but sometimes less effective, medications.
While many health plans still manage their own drug benefits, an
increasing number of plans are hiring a new breed of management
consultants known as pharmaceutical benefit managers (PBMs) to do their
work for them. These companies currently manage prescriptions for some
115 million Americans and the number is expected to reach 200 million
by the year 2000.
Plans have turned to PBMs in the hopes that they will be able to cut
rising prescription drug costs. PBMs accomplish that goal by setting up
lists of approved drugs (known as formularies), requiring specific
authorization of non-formulary drugs, and urging doctors--often by
providing financial and other incentives--to switch prescriptions for
less expensive medications.
Of greater concern is the fact that PBMs are often given free reign
to manage benefits through their own programs, with little oversight
from the health plan. And, PBMs are neither licensed health care
providers nor subject to federal regulation by the Food and Drug
Administration (FDA).
Several of the largest PBMs are now owned by drug manufacturers and
many independent PBMs have formed ``strategic alliances'' with drug
manufacturers, exchanging preferential treatment on a formulary with
millions of dollars in rebate payments from the drug companies. Since
1993, the three largest PBMs, serving fully 80% of covered enrollees,
have been acquired by drug manufacturers at a total cost of $12.8
billion. And, a January 1998 study showed that drug-company-owned PBMs
covered 41% of the lives enrolled in PBM programs.
Drug companies that ow PBMs say that they have ``firewalls'' in place
to prohibit the two companies from sharing proprietary information or
conducting joint marketing efforts
[[Page E1239]]
and other deals that benefit the drug company. But can any company
policy resolve this inherent conflict of interest, especially when the
goal is to maximize profit? If you've the CEO of a major drug company,
wouldn't it be tempting to try to get more doctors to prescribe your
company's new medication for high blood pressure?
I certainly think so. But, in case you think I'm just being cynical,
consider the case of PCS, the largest PBM covering 50 million lives.
When PCS was acquired by Eli Lilly, which manufactures Prozac, in 1994,
Lilly's chairman openly declared that ``this purchase will help us sell
even more Prozac.'' Internal PCS memos obtained by the New York City
Public Advocate revealed a plan to steer the company's managed care
customers toward Prozac and another top Lilly drug, the ulcer
medication Axid. Millions of messages would be sent to physicians and
pharmacists urging switches, leading to a projected $171 million in
additional sales.
Given that there are millions of dollars at stake for drug
manufacturers and PBMs, it's very tempting for these companies to join
forces to steer physicians to prescribe their products. But, there's
more at stake than just money--the health and welfare of Medicare
beneficiaries who join Medicare+Choice plans is also at risk. I am
attaching testimony given by the Public Advocate for the City of New
York before President Clinton's Advisory Commission on Consumer
Protection and Quality that clearly shows just how low these companies
will go to push their products.
I have introduced the Medicare+Choice Pharmaceutical Management Act
of 1998 to discourage these types of activities by requiring
Medicare+Choice plans to disclose the following information about their
pharmacy benefits management: the committee (if any) used to develop
and oversee drug formularies, including the composition of the
committee and how they decide what drugs to include on the formulary;
and incentives to physicians, pharmacists, and patients associated with
formulary compliance programs, including drug switching and any known
health risks associated with such a program; all policies and
procedures for any drug utilization reviews of physicians and
pharmacists, including any counseling, intervention, enforcement
actions, or penalties associated with these reviews; any expedited
process for amendment drug formularies to include new drugs that become
available, particularly those that treat or alleviate potentially life-
threatening illnesses; and any requirements for prior treatment
failures of a particular drug before approving alternative drug
therapies.
Medicare+Choice plans will be required to disclose this information
when they apply for a contract with Medicare and to make this
information and their drug formularies available to the public upon
request. That way, the Health Care Financing Administration (HCFA), the
agency that reviews these contracts, will know about a health plan's
pharmacy program--and any financial incentives to push certain drugs--
and can make the decision whether to contract with that plan or require
changes in their pharmacy benefits management. And, even
more important, the information will allow consumer groups and
individuals to make recommendations and choices about the managed care
plans that best serve the patient.
I urge my fellow Members of Congress to join with me in cosponsoring
the Medicare+Choice Pharmaceutical Management Act of 1998. Together, we
can ensure that Medicare beneficiaries get access to the prescription
drugs ordered by their physician, not by a benefits manager focused on
the bottom line.
Testimony of mark Green, Public Advocate for the City of New York,
Before the Advisory Commission on consumer Protection and Quality in
the health Care industry--February 26, 1998
We all know that there is no more common health care
experience in America than filling a prescription. But few
Americans know that the terms of our every day drug-counter
transactions are changing more fundamentally and rapidly than
anytime in modern medical history. I suggest that your report
to the President reflect this fact and propose reforms that
protect patients from the adverse consequences of ``drug
switching.''
A two-year investigation by my office has concluded that
health plans are now frequently intervening in the
prescription process, pressuring physicians and pharmacists
to switch medications to less therapeutically valuable drugs.
In addition, the approved ``drug formularies'' sometimes
exclude critical drugs from coverage altogether. These
preferences seldom have anything to do with medical
appropriateness. Indeed, for some individual patients, the
substituted drug is not as efficacious as the original
prescription and can lead to harmful side effects.
While the original intent of these now widespread
substitution strategies was to lower costs without affecting
the quality of care, existing research indicates that this
practice results in higher overall costs. Instead of cost-
containment, commercial interests have become the guiding
force behind drug preferences. Health care organizations have
established a variety of business relationships with drug
manufacturers that are shaping, and in some cases
compromising, drug choice. The exposure of these arrangements
has sounded a sudden alarm among those concerned abut the
independence and trust implicit in the prescription tradition
of American medicine.
Five federal agencies have weighed in critically on the
drug switching issue in the last few years: the FDA [US Food
and Drug Administration], the OIG [US Office of the Inspector
General], the HCFA [US Health Care Financing Administration],
the FTC [US Federal Trade Commission] and the GAO [US General
Accounting Office]. The FDA recently issued draft guidelines
to attempt to monitor these practices. Yet it is estimated
that 71 percent of HMOs will have programs encouraging
substitutions by the end of the year.
The American Medical Association says that the ``frequency
and intensity'' of HMO substitution interventions ``pit the
interest of patients against the economic interest of their
health care providers'' and have risen ``to the level of
harassment.'' The American College of Cardiology argues that
heart medications are highly specific to particular patients
and warns that substitutions represent ``a real and present
danger'' that could involve patients being switched to drugs
that might produce ``life threatening toxicity'' or other
adverse reactions. My own surveys of almost 400 New York
physicians and pharmacists found that 75 percent of both
believe substitutions are diminishing care, while almost all
said plans routinely contact and urge them to make
substitutions.
Recent academic and governmental reports have concluded
that both the employer groups paying the premiums and the
HMOs engaging in drug management tactics are becoming
increasingly concerned about the care-consequences of these
switches. Fourteen medical journal articles have reached
critical conclusions, six of which suggested that these new
drug preference practices may be leading to extended illness,
more visits to doctors and emergency rooms, longer
hospital stays and greater total costs.
What has galvanized this concern is the growing power of a
new force in drug selection--PBMs [pharmaceutical benefit
managers]. HMOs retain PBMs as consultants to help them
administer drug coverage. These companies, which have
overnight become billion dollar giants in their own right,
manage prescriptions for 115 million Americans. They are the
engines driving the new substitution initiatives. With 90
percent of HMOs now employing one form or another of pharmacy
management, 200 million Americans are expected to be covered
by PBMs by the end of the decade.
Though the initial rationale for turning over drug
management to PBMs was cost containment, drug costs continue
to increase as a share of total health costs and faster than
inflation. Indeed, drug costs have risen from $21 billion ten
years ago to $50 billion today, and ambulatory costs for
drug-related problems, including reactions to PBM-induced
substitutions, are how estimated at $76.6 billion.
PBMs develop the formularies, a list of covered and
preferred drugs, thereby determining prescription access for
millions of patients. They pay incentives to pharmacists to
get them to push doctors to switch prescriptions, and drop
independent pharmacists who do not engineer switches often
enough. PBM consultants call and visit doctors to discuss
specific patients and urge the use of specific drugs. They
impose rock-bottom prescription budgets on doctors, and
review the prescribing records of recalcitrant physicians to
make sure they make the favored drug selections. They even
punish patients who do not accept switches by charging them
higher co-pays. Yet PBMs are neither licensed as health care
providers nor regulated by any oversight agency.
But PBM drug preferences are frequently of questionable
independence. Since 1993, the three largest PBMs, serving
fully 80 percent of covered enrollees, have been acquired by
pharmaceutical manufacturers at a total cost of $12.8
billion. Other manufacturers have formed ``strategic
alliances'' with major PBMs, paying millions of dollars in
rebate payments for preferential treatment on a formulary.
The overarching corporate purpose of these acquisitions and
arrangements has clearly been to increase market share for
certain widely used drugs. Studies have shown, for example,
that the manufacturer-owned PBMs are unsurprisingly pushing
the prime pharmaceuticals of their owner.
PCS, for example, is the largest PBM, covering 50 million
lives. It was acquired by Eli Lilly, the manufacturer of
Prozac, in 1994. Lilly's chairman openly declared after the
PCS merger that ``this purchase will help us sell even more
Prozac.'' Internal PCS memos obtained by my office revealed a
plan to steer the company's managed care customers toward
Prozac and another top Lilly drug, the ulcer medication Axid.
Millions of messages would be sent to physicians and
pharmacists urging switches, leading to a projected, almost
instant, burst of $171 million in additional sales. Yet both
drugs cost more than effective competitors'.
PCS hired outside experts to justify the Prozac switch.
Though only one of the three consultants recommended knocking
a top competitor, Zoloft, off the preferred list, PCS did it
anyway. In fact, the one consultant they followed found that
Prozac had the longest dose adjustment time of three main
antidepressants--two and a half months
[[Page E1240]]
compared to Zoloft's five and a half days. The consultant
also found that Prozac produced far more side effects,
including headaches, sexual dysfunction, insomnia, diarrhea,
anxiety and agitation. Yet the PCS letter subsequently sent
to thousands of physicians erroneously suggested that Prozac
had the shortest adjustment time and fewest side effects.
The misuse of this PCS drug utilization letter for
transparent promotional purposes was one of the reasons the
FDA recently decided to monitor drug substitutions. HCFA
recently reported that PCS believes that 30 percent of the
prescriptions written under its preferred drug program are
successfully switched, providing some measure of how
extensive this practice is becoming.
Such drug policies influenced by commercial interests can
have damaging effects on care. Patients are being switched to
chemically dissimilar agents that are not rated as equivalent
by the FDA, and usually have different side effects, dosages
and efficacy rates. Patients stabilized on one medication are
also being moved to another without any clinical cause,
leading one doctor to label these switching strategies
``massive unfunded human experimentation.'' With doctors
constrained by preferred lists, the many differences between
patients--age, ethnicity, multiple disease states--are not
always factored into prescribing decisions.
Hurt most by these practices are the elderly and
chronically ill because they often consume daily dosages of a
variety of highly competitive medications. Take the example
of 65-year-old Clara Davis, a retired grocery store manager
from Bolivar, Tennessee. She lost a third of her stomach
after her ulcer medication was switched. Her physician tried
to persuade her plan not to force the substitution but it
insisted. While recovering from the operation she suffered a
paralyzing stroke.
As we meet, several states--Maine, New York, California and
Virginia--are considering legislative action to protect the
Clara Davis' of this country and to restrict drug formularies
based more on commercial, rather than health, considerations.
But ultimately, since drug sales are obviously national in
scope, there must be a national policy on drug substitutions.
I urge you not to squander your once-in-a-generation
opportunity to stop this new and growing trend of HMOs--not
physicians and pharmacists--prescribing the pills that we all
swallow.
Given how extensive and harmful managed-care-driven drug
substitutions have become, I urge the Commission to include
this language in their final report. I believe that these
recommendations implement the mandates of the Consumer Bill
of Rights on Information Disclosure and Participation in
Treatment Decisions:
``Consumers should be fully informed about all factors
affecting a prescription choice. Health care organizations
and physicians should disclose any possible side effects or
economic reasons for a recommended therapeutic switch. Health
care organizations should restrict substitutions to those
that are found to be therapeutically equivalent by the FDA.
Consumers should be free to reject these recommended switches
without penalty, such as the imposition of a higher co-
payment. Consumers have the right to continue on a drug
regimen that has been medically beneficial for them, without
pressures on their physician to switch. Health care
organizations should make their preferred drug lists, as well
as formularies, available to consumers. Drug substitutions
should take into account the potential overall cost of a
change in care, not merely the comparative costs of two
medications in the same therapeutic category.
``The President should provide strong, continuous
leadership to improve the quality and delivery of
prescription drug care in the United States. The President
should act to eliminate all commercial interests advising,
selecting or influencing prescription drug treatments and act
to improve the health of all Americans by developing a
patient-specific prescription drug policy.''
references
Scientific Studies and Reports
1. Bloom BA, Hacobs J: ``Cost-effects of Restricting Cost-
effective Therapy.'' Med Care 23:872-80, 1985.
2. Bootman JL, Johnson JA: ``Drug-Related Morbidity and
Mortality: A Cost-of-Illness Model.'' Arch Intern Med
155:1949-56, 9 Oct. 1995.
3. Cromwell DM, Moore RD, Steinberg EP, et al.: ``Florida's
Restrictions on Reimbursement for Peptic Ulcer Disease Drugs
Associated with Increased Hospitalizations.'' Presented at
the First Annual Research Service Award trainees Research
Conference. Chicago; 3 June 1995.
4. Etheredge L: ``Pharmacy Benefit Management: The Right
Rx?'' In: Research Agenda Brief, from a discussion by the
George Washington University National Health Policy Forum.
Washington DC; 21 May 1995.
5. Horn SD, Sharkey PD, Tracy DM, et al.: ``Evidence of
Intended and Unintended Consequences of HMO Cost Containment
Strategies: Results from the Managed Care Outcomes Project.''
Am J Man Care 2:253-264, 1996.
6. Krelig DH, Knocke DJ, Hammel RW: ``The Effects of an
Internal Analgesic Formulary Restriction on Medicaid Drug
Expenditure in Wisconsin.'' Med Care 27:34-44, 1989.
7. Levy RA, Cocks D: ``Component Management Fails to Save
Health Care System Costs: The Case of Restrictive Drug
Formularies.'' Washington DC: National Pharmaceutical Council
1996.
8. Magid D, Douglas JM, Schwarz JS: ``Doxycycline Compared
with Azithromycin for Treating Women with Genital Chlamydia
Trachomatis Infections: An Incremental Cost-effectiveness
Analysis.'' Annals of Intern Med 124-389-399, 1996.
9. Moore JM, Newman R: ``Medicaid Drug formularies: Opening
Closed Doors.'' Washington DC: American Legislative Exchange
Council 1990.
10. Schulman KA, Rubenstein LE, Abernathy DR, et al.: ``The
Effect of Pharmaceutical Benefits Managers: Is It Being
Evaluated?'' Annals of Intern Med 124:906-913, 1996.
11. Shulman SR, DiCerbo PA, Ulcickas ME, Lasagna L: ``A
Survey of Therapeutic Substitution Programs in Ten Boston
Area Hospitals.'' Drug Info J25:41-52, 1992.
12. Sloan FA, Gordon GS, Cocks DL: ``Hospital Drug
Formularies and the Use of Hospital Services.'' Med Care
31:851-867, 1993.
13. Smalley WE, Griffin MR, Fought RL, et al.: ``Effect of
a Prior-authorization Requirement on the Use of Nonsteroidal
Antiinflammatory Drugs by Medicaid Patients.'' N Engl J Med
332:1612-7, 1995.
14. Soumerai SB, Ross-Degan D, Fortess EE, Abelson J: ``A
Critical Analysis of Studies of State Drug Reimbursement
Policies: Research in Need of Discipline.'' Milbank Quart 71
(2):217-252, 1993.
15. Soumerai SB, McLaughlin TJ, Ross-Degan D, Casteris CS,
Bollini P: ``Effects of Limiting Medicaid Drug-reimbursement
Benefits on the Use of Psychotropic Agents and Acute Mental
Health Services by Patients with Schizophrenia.'' N Engl J
Med 331:650-655, 1994.
16. Soumerai SB, Lipton HL: ``Computer-based Drug-
utilization Review: Risk, Benefit, or Boondoggle?'' N Engl J
Med 332:1641-5, 1995.
Federal Government Agencies--
United States Food and Drug Administration
1. ``Guidance for Industry: Promoting Medical Products in a
Changing Healthcare Environment; I. Medical Product Promotion
by Healthcare Organizations or Pharmacy Benefits Companies
(PBMs)''. Docket No. 97D-0525) 1998.
United States General Accounting Office
1. ``Pharmacy Benefit Managers: Early Results on Ventures
with Drug Manufacturers'' GAO/T-HEHS-96-85 (Nov. 1995).
United States Health Care Financing Administration
1. ``Assessment of the Impact of Pharmacy Benefit
Managers.'' HCFA-95-023/PK (September 30, 1996).
United States Office of Inspector General
1. special fraud alert issued by OIG (August 1994).
2. ``Experiences of Health Maintenance Organizations with
Pharmacy Benefit Management Companies.'' OIG-01-95-00110,
April 1997.
State Attorneys General
1. In the Matter of the Upjohn Company: Assurance of
Discontinuance/Assurance of Voluntary Compliance. Entered by
the State Attorneys General of Arizona, Iowa, Minnesota,
Missouri, New York, North Carolina, Texas and Wisconsin, July
1994.
Medical and Healthcare Groups
1. American College of Cardiology: ``Position statement:
Therapeutic substitution.'' 22 Feb. 1988.
2. American College of Physicians: ``Position paper:
Therapeutic substitution and formulary systems.'' Annals of
Intern Med 113-160-2, 15 Jul. 1990.
3. American Medical Association: ``AMA policy on drug
formularies and therapeutic interchange in inpatient and
ambulatory patient care settings.'' Am J Hosp Pharm 51:1808-
10, 1994.
4. American Pharmaceutical Association: ``Statements at the
Food and Drug Administration's Hearing on Pharmaceutical
Marketing and Information Exchange in Managed Care
Environments.'' 19 Oct. 1995.
5. National Association of Chain Drug Stores: Petition to
the Federal Trade Commission (12 Jun. 1996).
Legislative Initiatives
1. California Senate Bill 625 (Senator Rosenthal), passed
the Senate, in the House. California Assembly Bill 1136
(Assembly member Brown), passed in Senate and House, died in
Conference Committee, Nov.30, 1996.
2. New York State Assembly. Hearing held by the Standing
Committees on Insurance and Health, New York City: May 1,
1997
3. Virginia Senate Bill No. 1114, as amended, 1997.
Litigation
1. Pfizer v. PCS, No. 96-126154 (S.D.N.Y. filed Oct. 1995).
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